The city of Mt. Clemens contracted with the Macomb County Sheriffs department for police work.

The city of Pontiac is in dire straits. It had an official
fiscal year 2005 operating shortfall of nearly $11 million and it technically
mitigated an expected 2006 general fund deficit by borrowing more than $21
million last February. Moreover, financial auditors have questioned whether or
not Pontiac can even remain a "going concern." The Mackinac Center for Public
Policy believes it can, provided bold structural changes are made to the system.

The Mackinac Center has been following Pontiac’s
deteriorating financial condition and has warned that an emergency financial
manager — with proper powers — may be necessary to right Pontiac’s sinking
financial ship. It is important to stress "proper powers" because without the
ability to set aside union contracts the manager’s work could be easily stymied. For the sake of argument, assume that an emergency financial manager had this authority. Where should they start making structural reforms? The answer is with city police.

Reforms need to be made that take Pontiac beyond the point of simply keeping its fiscal head above water.

The first official act of an emergency financial manager in
Pontiac should be to negotiate a new agreement for law enforcement services. The
manager could demand cost-cutting reforms from the Pontiac Police Department or
it could contract with Oakland County for sheriff-provided law enforcement.
According to the city’s fiscal year 2007 budget, city police represent the
second largest employment unit in the city with 149 personnel. A competitively
bid contract would likely lower costs to the city and improve services too.

It is important to focus on public safety for two reasons.
First, more than 52 percent of the city’s fiscal 2007 general fund expenditures
are gobbled up by police and fire services. It makes sense to look at the areas
that cost the most. Second, basic services matter. People need and want public
safety and at a good price. If they don’t get it, they may vote with their feet.
Between 1990 and 2000 Pontiac lost 6.7 percent of its population and that number
has grown since.

Competitive contracting for police services is not a new
concept. In fact, Oakland County provides 11 townships and the city of Rochester
Hills with a police presence under contract. The county also provides emergency
dispatch services to others.

In neighboring Macomb County, Mt. Clemens gave up its
118-year old city police force in favor of a contract with the sheriffs
department and is expected to save $1.4 million a year. According to Marilyn
Dluge, Mt. Clemens’ finance director, that works out to a staggering 38 percent
drop in the cost of providing such services in this fiscal year. The city, which
approved the contract in July 2005, would have been bankrupt by December of that
year had the deal not been struck, says Dluge. Pontiac needs to look for similar
savings.

According to Pontiac’s fiscal 2007 adopted budget, police
expenditures amount to $17 million, $16.1 of which is paid out of the general
fund. If Oakland County took over the city’s police department and saved the
city just 20 percent, it would translate into more than $3.2 million in annual
savings for the general fund, or nearly one-third of the city’s official $10.9
million operating shortfall in fiscal year 2005. The general fund account is the
area of operations over which elected officials have the most control. When the
2006 financial audit of Pontiac is complete, it is likely to show an increase in
the city’s general fund deficit.

The city’s expenditures for fire suppression and medical
services should also be reviewed for savings, but such an analysis extends
beyond the scope of this essay.

There is some good news to report out of Pontiac. The city
has contracted with Plante & Moran, LLC to act as city controller. This is a
prudent decision. Without a sound accounting system, the city does not know
month-to-month how much it has with which to pay its bills. Also, the city is
considering leasing out or even selling its public golf course and the Pontiac
Silverdome. The outright sale of such assets will not only generate one-time
revenue, but the facilities can be put on the property tax rolls where they will
start generating additional income.

Reforms need to be made that take Pontiac beyond the point of
simply keeping its fiscal head above water. The city can start its long road to
recovery by changing the structural nature of annual spending. Competitively
contracting for police services would be a bold start.

#####

Michael D. LaFaive is director of the Morey Fiscal Policy
Initiative at the Mackinac Center for Public Policy, a research and educational
institute headquartered in Midland, Mich.
Permission to reprint in whole or in part is hereby granted, provided that the
author and the Center are properly cited.

ISSN: 1093-2240,
SKU: V2006-31

Summary

The city of Pontiac is edging toward financial ruin. One way to arrest this slide is to introduce competitive contracting to one of the bigger general fund expenditures: public safety.